We don't have to settle for lost jobs and lower wages

Robert B. Reich

Jobs are returning with depressing slowness, and most of the new jobs pay less than the jobs that were lost in the Great Recession.

Economic determinists assume that globalization and technological advancement necessarily condemn a large portion of the American workforce to underemployment and stagnant wages, while rewarding those with the best educations and connections with ever higher wages and wealth.

Many on the right of the political spectrum say we should accept this outcome because we mustn't interfere with the free market. Some on the left say we should withdraw from global trade; a few want us to become neo-Luddites and stop using labor-saving technologies.

Both sides are wrong. Other nations subject to the same forces of globalization and rapid technological change are doing far better for their average workers.

Germany was generating higher real median wages until recently, before it was dragged down by Europe's austerity economics. Singapore and South Korea continue to do so. Chinese workers have been on a rapidly rising tide of higher real wages for several decades.

These nations are implementing national economic strategies to build good jobs and widespread prosperity. The United States is not.

Why not? Because we don't have the political will to implement them, and also because we're trapped in an ideological straitjacket that refuses to acknowledge the importance of such a strategy.

The irony is that we already have a national economic strategy, but it's been dictated largely by powerful global corporations and Wall Street. Not surprisingly, rather than increase the jobs and wages of most Americans, that strategy has been increasing the global profits and stock prices of these giant corporations and Wall Street banks.

What would a national strategy designed to increase jobs and wages look like?

For starters, it would focus on raising the productivity of all Americans through better education -- including early-childhood education and near-free higher education.

This would require a revolution in how we finance public education. It's insane that half of K-12 budgets across America still come from local property taxes, for example, given that we're segregating geographically by income. Moreover, it makes no sense to rely on student debt to finance the higher education of young people from middle- and lower-income families. This has resulted in a mountain of debt that can't or won't be paid off. And it falsely assumes that higher education is a private investment rather than a public good.

Raising the productivity of all Americans would also require greater accountability by all schools and universities for better outcomes -- but not just better test results. The only sure thing standardized tests measure is the ability to take standardized tests. The new economy demands problem-solving and original thinking, not standardized answers.

Better education would just be a start. We would also unionize low-wage service workers in order to give them bargaining power to get better wages. Such workers -- who mostly work for big-box retailers, fast-food chains, hospitals and hotel chains -- aren't exposed to global competition or endangered by labor-substituting technologies, yet their wages and working conditions are among the worst in the nation. And they represent some of the fastest-growing job categories.

We would raise the minimum wage to at least half the median wage and expand the Earned Income Tax Credit. We'd also eliminate payroll taxes on the first $15,000 of income, and make up the shortfall in Social Security by raising the cap on income subject to the payroll tax.

We'd also restructure the relationships between management and labor. We'd require, for example, that companies give their workers shares of stock and more voice in corporate decision-making. And that companies spend at least 2 percent of their earnings upgrading the skills of their lower-wage workers.

We'd also condition government largesse to corporations on their agreement to help create more and better jobs. For example, we'd require that companies receiving government R&D funding do their research and development in the U.S.

We would prohibit companies from deducting the cost of executive compensation in excess of 100 times the median compensation of their employees or the employees of their contractors. And bar them from providing tax-free benefits to executives without providing such benefits to all their employees.

And we would turn the financial system back into a means for investing the nation's savings, rather than a casino for placing large, risky bets that impose costs on everyone else when they go bad. That means limiting the size of the biggest banks and resurrecting the Glass-Steagall Act.

There's no magic bullet for regaining good jobs and no precise contours to what such a national economic strategy might be, but at the very least we should be having a robust discussion about it. Instead, economic determinists and free-market ideologues are preventing such a conversation from even beginning.

Robert Reich, former U.S. Secretary of Labor, is professor of public policy at the University of California at Berkeley and the author of "Beyond Outrage," now available in paperback. He blogs at www.robertreich.org.